Royal Mail has been fined £5.6m by the regulator for missing its first- and second-class delivery targets.
Ofcom said Royal Mail missed the targets by a “significant and unexplained margin”, causing “considerable harm” to its customers.
The company delivered more than a quarter of first-class post late, with only 74% arriving on time in the 2022-23 financial year, far below its statutory target of 93%.
It also missed its second-class target, delivering 91% on time compared with a target of 98.5%, and its postal workers completed 89% of delivery routes for each required day, a far cry from the 99.9% expectation.
Royal Mail’s parent company, International Distributions Services (IDS), is owned by investors and listed on the London Stock Exchange’s FTSE 250 index of mid-sized companies. But it still has obligations to deliver post on time, a legacy from before it was privatised in 2013.
Royal Mail has struggled in recent years as the volume of letters being delivered has declined markedly. That has been exacerbated by poor relations with its workforce, resulting in a series of strikes during its peak period in November and December last year, and a ransomware computer attack in January during which hackers demanded $80m (£65m) to decrypt files.
The surge in online shopping, particularly during the coronavirus pandemic lockdowns, has increased parcel volumes, but Royal Mail also faces stiff competition on that front. Last week, it lost a 360-year monopoly on delivering parcels from branches of the Post Office, which has been independent since 2012.
Ian Strawhorne, the Ofcom director of enforcement, said: “Clearly, the pandemic had a significant impact on Royal Mail’s operations in previous years. But we warned the company it could no longer use that as an excuse, and it just hasn’t got things back on track since.
“The company’s let consumers down, and today’s fine should act as a wake-up call – it must take its responsibilities more seriously. We’ll continue to hold Royal Mail to account to make sure it improves service levels.”
Royal Mail argued that some disruption was “outside of Royal Mail’s control”, which it said included strikes during a long-running dispute with workers, as well as extreme weather and the closure of Stansted airport’s runway for resurfacing, which reduced the number of flights allowed. However, Ofcom said first- and second-class punctuality was still only 82% and 95.5%, respectively, when taking those factors into account.
In a statement, Royal Mail said it was “very disappointed” with its performance. It said: “Last year was uniquely challenging for Royal Mail. Quality of service was materially impacted by the long-running industrial dispute which included 18 days of strike action.”
It said punctuality was “extremely important to us” and that it was taking unspecified actions to improve performance. Ofcom granted a 30% discount on the fine to the company after it admitted liability. It will have two months to pay the fine to the government’s Treasury.
Improving Royal Mail’s performance is a vital task for the IDS chief executive, Martin Seidenberg, who was hired in July to try to turn around the business after it reported a £748m loss for its financial year to 26 March. The traditional letters and parcels business, which has retained the Royal Mail name, lost £1bn. IDS was rebranded in 2022 to emphasise the difference between Royal Mail and GLS, an international parcels business which is profitable.
As well as coming to an agreement with workers after the protracted strike action, Royal Mail is seeking to cut costs by dropping the requirement for it to deliver letters on Saturdays. Ofcom has previously said that Royal Mail could save up to £225m annually by dropping Saturday deliveries, although that would require legislation to change the universal service obligation.
Ofcom also on Monday said that it had found no evidence of a related claim that Royal Mail managers were directing workers to prioritise more profitable parcels over letters in breach of its obligations. Ofcom did say, however, that Royal Mail did not have sufficient oversight of local offices.
Ofcom inspector “In the evidence we assessed, we did not identify any suggestion that Royal Mail’s senior management had directed the prioritisation of parcels over letters.”
— CWU (@CWUnews) November 13, 2023
The Inspector….. pic.twitter.com/RQlUoMCyz4
The Communication Workers’ Union, which represents postal workers, posted a meme critical of Ofcom’s investigation on social media in response.
